Why Do Some States Allow Lending & Others Do Not?
As you may be aware, some states in the United States allow the lending of payday loans and others have made it illegal. But, why are the rules so different depending on your location? Many states have clamped down on the usage of this type of finance due to the consequences which may occur if there are issues at any point in the process.
Legislation
Payday loans are small sums of money which people may borrow if they find themselves in a situation needing financial help. Typically, they are under £2000 and repaid over the course of up to a year. After years of changes within the laws regarding payday loans there are still a large number of states in which payday loans are not legal or have some sort of restrictions.
Legislation regarding payday loans varies widely between different countries and, within the United States, between different states. As mentioned above, only specific states allow the lending of payday loans and other have set rules lenders must abide by. But, which states allow what?
Prohibited
- Arizona
- Arkansas
- Pennsylvaniaa
- Vermot
- West Virginia
- North Carolina
- Connecticut
- Georgia
- Maryland
- Massachusetts
- New Jersey
- New York
Why are payday loans prohibited here?
There are multiple reasons as to which states have decided to ban payday loans from the region, but what actually are they? We have gathered the three most common reasons as to why.
First of all, the most common reason associated with payday loans is that they are ‘designed to trap the borrowers into debt’. Secondly, payday loans have high APR rates which make the process unfair. Last of all, borrowers are likely to have to take out another loan if they cannot afford the repayements agreed.
Now, as you can see by the statistics of the number of states who allow lending and those who do not, these views are clearly overpowered by positive aspects. Loans are not provided to cause debt to the borrower, they are used to help with financial emergencies.
Why do states allow lending?
The are plenty of lenders on the web who pretend to be legitimate and safe, but in reality they are not. These are the ones you need to keep an eye out for. Besides this, the majority of lenders are safe if they are regulated.
Luckily, we work with a vast amount lenders who offer secure, helpful services all over the USA. As mentioned, loans are there to provide help. They should not be lent if a customer may struggle with the repayments in the future, hence the demand of credit checks. A lender will also take into consideration financial positions before lending to anybody who applies. This way, people are not being ‘trapped into debt’ but guided financially with help available.
APR are controlled in the US. This means that they cannot be over a certain amount, but this will vary depending on the state. They also are applied to a persons credit score/rating. This means that if you have a higher credit score, you are more likely to have a lower APR.
Last of all, loans have scheduled repayments which you will be aware of before making any final decisions. They are a specific amount which is paid every month, meaning that if you slide it into your budget, you will be able to repay the loan without having to borrow anything more.
To find out about lending states in more detail, click here.